Saudi Arabia still to fill economy hotel gap

Saudi Arabia is set to see a rush of new economy hotel options over the next couple of years but a big gap in the Gulf kingdom's market will still exist, Colliers International has said in a new report.

It said there are currently seven large cities in the country without any economy hotels but international brands are poised to add nearly 1,200 rooms by 2015.

The Colliers research found that there is a limited supply of quality internationally branded economy hotels in the kingdom, representing a "significant gap in the market".

But well established brands such as Ibis, Centro, Premier Inn and Holiday Inn Express are slated to make their debut in the country, Colliers added.

Colliers said that the market could potentially absorb an additional 34,882 economy hotel rooms over and above forthcoming supply over the next five years, spread across major and secondary cities.

"Attractive investment opportunities lie in wait as economy hotels operate with a very cost-efficient structure characterised by a less volatile and sustainable pricing strategy," the report said.

Colliers said the total hotel supply in 2011 was estimated at 157,430 rooms, of which only 22 percent was classified under the ‘three star’ categorisation.

Of these hotels, approximately 70 percent of the rooms were in the Makkah region, with the remaining 30 percent primarily spread over Riyadh, Madinah, Eastern Province, Asir, Tabuk, Jazan and Al Baha.

The report added that confirmed forthcoming supply of internationally branded economy hotels include 336 rooms by 2013, 484 by 2014 and 1,182 by 2015 across the Gulf kingdom.

Wyndham Worldwide last year signed an agreement with the Saudi Automotive Services Company to develop 20 hotels under the Super 8 brand.

Colliers research into 15 cities indicated that economy hotel occupancy levels ranged from 61-80 percent in major cities and 51-68 percent in secondary cities.